The Week Ahead 08 May- 12 May

France has chosen its youngest French leader since Napoleon as its next President. For the French, Emmanuel Macron represents change.

The French took to the polls yesterday in the decisive round of the Presidential Electoral process. The outcome was a landslide: over 65% of voters went with Emmanuel Macron in a clear victory over Marine Le Pen. This outcome was well expected after Le Pen’s poor showing in last Wednesday’s TV debate and the Euro had rallied all last week. The initial market reaction has been to sell the opening rally, in a classic “buy the rumour, sell the news” move so far.

Despite Macron’s strong victory there are some important things to note. First, turnout was lowest since 1969 with 26% of the electorate abstaining to vote and further 12% either spoiling or blanking their vote. This shows voter apathy with the two options on offer. For Macron to build on his victory, he is in desperate need to gain votes in the elections to the National Assembly. If he does not do so, he risks being a lame duck. The other point is that 35% of voters went with a Front National candidate, double the amount since 2002 when her father made the run-off. This should not be taken lightly – the far right have been emboldened.

Trading in the Euro is likely to remain volatile and a move lower to test yearly lows should not be discounted. Furthermore, the ECB does not want a strong Euro – this could threaten the bloc’s recent economic recovery. This week’s focus is back on the UK and US. US CPI and retail sales are expected towards the end of this week will provide further insight about the US economy.

The French presidential election is over and Macron will be sworn in on Sunday. But political risk hasn’t gone away. All eyes are now on the upcoming UK and German elections.